TaxTMI 
TaxTMI 
2021 (3) TMI 1214
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....ckage notified by the RBI vide notification dated 27.03.2020 insofar as the terms loans, working capital facilities and restructuring of Stressed Account is inadequate, ineffective and does not offer any substantial relief, aid or assistance to the industries particularly MSMEs. According to the Petitioner, the above-mentioned Regulatory Package will not in any manner salvage the MSMEs and help them recover from financial losses that have been caused due to the unforeseen circumstances. With the above broad grievances, it is prayed as under: (a) issue writ/writs including a writ of mandamus or any other writ or direction in the nature thereof, directing the Respondents to permit the lending institutions not to recover interest component from the industries particularly MSMEs on Term Loans and Working Capital Facilities availed by them for three months from 01.03.2020 to 31.05.2020; (b) issue writ/writs including a writ of mandamus or any other writ or direction in the nature thereof, directing the Respondents to permit the lending institutions to grant interest free moratorium period for Term Loan and not recovery of interest on Working C....
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....Writ Petition (Civil) No. 1024 of 2020 has been preferred Under Article 32 of the Constitution of India by the Petitioner - Confederation of Real Estate Developers Association of India (CREDAI), for and on behalf of the private real estate developers in Chhattisgarh, also challenging notification dated 27.03.2020 issued by the RBI to the extent charging interest on the loan amount during the moratorium period. It is also prayed for an appropriate writ, direction or order directing the Respondents - Union of India to take adequate measures of reliefs to the disaster affected persons in accordance with letter and spirit of Disaster Management Act, 2005, more particularly Sections 12 and 13 of the said Act, more particularly to the reliefs with respect to waiver of loan and/or interest on all kind of loans availed by the borrowers/disaster affected persons through a well informed and formulated policy. 1e. Writ Petition (Civil) No. 1025 of 2020 Under Article 32 of the Constitution of India has been preferred by the Chhattisgarh Sponge Iron Manufacturers Association, also challenging notification dated 27.03.2020 issued by the RBI, which has been further extended vide notification d....
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....dia, RBI and others to provide such financial relief to its members, freezing all financial liabilities of such members towards banks and financial institutions. It is also further prayed to direct the RBI to apply Circular dated 27.03.2020 to all banks, non-banking financial companies, housing finance companies and other financial institutions compulsorily and mandatorily to all loan accounts without any discrimination or classification. 1i. Writ Petition (Civil) No. 506 of 2020 Under Article 32 of the Constitution of India has been preferred by one private limited company challenging notification dated 27.03.2020 issued by the RBI to the extent charging interest on the loan amount during the moratorium period. 1j. Writ Petition (Civil) Diary No. 12389 of 2020 Under Article 32 of the Constitution of India has been preferred by the Shopping Centres Association of India (SCAI) for and on behalf of its members who are engaging in Malls and Shopping Centres challenging notification dated 27.03.2020 issued by the RBI to the extent charging interest on the loan amount during the moratorium period. It is also prayed to extend the moratorium period beyond August, 2020. An applicatio....
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....etion of under-construction projects on account of Covid-19 and the lockdown, by another one year while maintaining the "standard" asset categorisation. It is also further prayed to direct the Respondents to include Non-Convertible Debentures as part of the relief granted by the RBI in its notification dated 27.03.2020, as well as, any other Covid-19 related relief which may be granted. 1n. Writ Petition (Civil) No. 711 of 2020 Under Article 32 of the Constitution of India has been preferred by Coimbatore Jewellery Manufacturers Association for and on behalf of its members to declare that part of notification dated 27.03.2020 issued by the RBI, as extended by notification dated 23.05.2020, as ultra vires to the extent it charges interest on the loan amount during the moratorium period. It is also prayed to direct the Union of India and the RBI to provide relief in repayment of loan by not charging interest during the moratorium period declared by notification dated 27.03.2020, further extended by notification dated 23.05.2020. It is also further prayed to extend the moratorium period on payment of instalments/interest by a further period of 18 months, in exercise of powers Under....
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....on dated 27.03.2020 issued by the RBI, as extended by notification dated 23.05.2020, charging the interest and also interest on interest (penal interest) during the moratorium period as ultra vires. 1t. Writ Petition (Civil) No. 1029 of 2020 Under Article 32 of the Constitution of India has been preferred by an individual challenging notifications dated 27.03.2020 and 23.05.2020 to the extent charging interest on the loan amount during the moratorium period. 1u. Writ Petition (Civil) No. 1157 of 2020 Under Article 32 of the Constitution of India has been preferred by the Chhattisgarh Udyog Mahasangh also challenging notifications dated 27.03.2020 and 23.05.2020 to the extent charging interest/interest on interest (penal interest) on the loan amount during the moratorium period. It is also prayed to direct the Union of India to take adequate and effective measures of reliefs to the disaster affected persons in accordance with letter and spirit of Disaster Management Act, 2005, more particularly in terms of Sections 12 and 13 of the said Act, and such reliefs including inter alia suitable waiver of loan and/or interest on all kind of loans availed by the borrowers/disaster affe....
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....half of the respective Petitioners in Writ Petition (C) Nos. 964/2020, 1024/2020, 1025/2020, 1132/2020, 1157/2020 and 1178/2020 has made the following submissions: i) that this Court ought not to limit the scope for relief and directions only qua waiver of compound interest which is limited to a highly restricted segment of the class of borrowers. It is submitted that shorn of technicalities of pleadings and specific prayers, this Court must take cognizance in public interest of the severity and the magnitude of the disaster and mould the relief accordingly to extend an effective measure of relief to an utterly distressed class of people affected by the pandemic of Covid-19; ii) that Covid-19 pandemic is a disaster in itself of an unprecedented history. It undoubtedly requires disaster management; iii) that the "disaster management" must be and can only be addressed under the statutory regime of law enacted by the Parliament. The question of executive response will come into play only after the special law on the aspect of "disaster management" has run its full course. There is no way that the issues arising out of t....
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....ement" is defined in Section 2(e) of the Act; viii) that the "disaster management" is a continuous and integrated process of planning, organising, coordinating implementing measures which are necessary and expedient for "...Mitigation or reduction of risk of any disaster or its severity or consequences...". That the issues which arises squarely fall within the meaning and amplitude of "disaster management" which is statutorily mandated Under Section 2(e) of the Act; ix) that the word "mitigation" has been defined in Section 2(i) and the word "resources" has been defined in Section 2(p) of the DMA 2005; x) that in the present case the steps for disaster management have not been undertaken by the statutory authorities under the Act, which makes out a plain and simple case of issue of mandamus to put the statutory authorities in action for performing their duties under the law; xi) that while Section 11 mandates duty to draw up a plan for disaster management for the whole country, at least this Court has not been informed of any such national plan; xii) that Section 12 of the ....
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....taking a study by experts; xv) that Section 13 which casts duty upon the National Authority to recommend relief in the matter of repayment of loans and/or grant of fresh loans on concessional terms does not make any differentiation among the class of 'persons affected by disaster'. The class of persons affected by disaster is one integrated class as the Covid-19 pandemic has affected every single individual person, the difference may be of degree. Section 13 intends to provide relief in the matter of repayment of loans etc. to all the persons affected by the disaster and does not admit of any classification. While this much is the minimum scheme of law, the National Authority has not made any recommendation with regard to relief in the repayment of loans and/or for grant of fresh loans to persons affected by disaster on such concessional terms as may be appropriate. There has been a complete inaction on the part of the National Authority in performing the legal duty. It is submitted that any recommendations of the National Authority Under Section 13 of the DMA 2005 have not been brought to the notice of this Court; xvi) that some ....
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....ower can neither be delegated nor abdicated. The measures formulated by the Ministry of Finance and RBI have to have the approval and sanction of the National Authority which alone has the authority to make their recommendations; xviii) that even the government in discharge of executive functions and providing administrative response have to act as "parens patriae" which doctrine is embedded in the preamble of the Constitution. It is submitted that the government in democracy or any other government has to act only and only for the welfare of the people. In support of his submission, reliance is placed on the decision of this Court in the case of Charan Lal Sahu v. Union of India, (1990) 1 SCC 613 (paragraph 35). It is submitted that therefore when the doctrine of parens patriae gets attracted, the lack of resources or financial considerations resulting in denial of relief to the needy persons affected by disaster is no answer and cannot be pressed into service. It is submitted that the government is simply bound to arrange its coffers in such a manner that the relief cannot be denied. Reliance is placed upon the decision of this Court in....
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....s affected by the disaster are entitled to at the hands of the statutory authority and also the welfare Government towards disaster management and within its contemplation extension reliefs and concessions, is misconceived as matters of bounty and/or charity described as ex-gratia. The distressed class of persons affected by the disaster are entitled to reliefs and concessions as a matter of right because that flows from the legal and statutory duty imposed by the statutory law of Parliament - DMA 2005 and the supreme law of the land, i.e., the Constitution of India. It is submitted that it is because of this approach of a gratis underlying the scheme that both the statutory authorities and Union of India have miserably failed to address the issue in right perspective and grant relief and concessions to the persons affected by the disaster in an effective, meaningful and substantial manner; xxiii) that even the Scheme dated 23.10.2020 contains the eligibility criteria as under: 4. Eligibility criteria under the scheme (1) Borrowers in the followi....
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....; (iii) The ex-gratia payment under this scheme shall be admissible irrespective of whether the borrower in Sub-clause (1) has fully availed or partially availed or not availed of the moratorium on repayment announced by RBI vide its circular DOR. No. BP.BC.47/21.04.048/2019-20, dated 27th March, 2020 and extended on 23rd May, 2020. It is submitted that a perusal of the aforesaid will show that the relief and concession which was announced in the affidavit of the Union of India dated 02.10.2020 has been further restricted making it wholly arbitrary and eyewash. It is submitted that the following restrictions are obvious from paragraph 4: i. That it is applicable to the borrowers in the 7 class/segments; ii. It is applicable to the borrowers who have loan accounts having sanction limits and outstanding amount of not exceeding 2 crores; iii. The aggregate of all facilities with lending institutions should not exceed 2 crores as on 29.02.2020; iv. That the account should be standard....
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....bsp; xxv) that affidavit dated 02.10.2020 shows that there is a classification between 'small borrowers' and 'big borrowers'. It is submitted that this classification is wholly arbitrary. It is submitted that in the process of this classification a sizable and much bigger class of 'middle class borrowers' has been completely excluded and no treatment has been accorded to the class of borrowers situated between the small and big classes. It is submitted that this classification therefore is clearly unrealistic and unscientific. It is submitted that neither any study has been done nor the classification has been made on any rational basis which has nexus with the ground reality; xxvi) that the classification of borrowers is both discriminatory and arbitrary and thereby in violation of Article 14 of the Constitution. It is submitted that the classification is solely irrational, unreal, unscientific and highly subjective, thereby suffering from the vice of arbitrariness violating Article 14 of the Constitution; xxvii) that the classification has no nexus at all with the object sought to be achieved whereas the ob....
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....ven otherwise defer the payment of loan during the moratorium period as per circular dated 27.3.2020, it cannot be said that there is any wilful default which warrants interest on interest/penal interest/compound interest. It is submitted that there shall not be any interest on interest/penal interest/compound interest charged for and during the moratorium period; xxxi) that even otherwise limiting relief and concessions to the victims of disaster to waiver of compound interest alone is arbitrary, insufficient, irrational and discriminatory. It is submitted that the so-called waiver of compound interest can only be one of the measures but ought not to be allowed to be the end of the road by closure of the case as has been sought by the Union of India. Only a proper and objective study will reveal whether relief more than the waiver of compound interest is the dire need of the persons affected by the disaster. Sections 12 and 13 of the DMA 2005 envisage reliefs in terms of more than what is sought to be done under the pretence of ex-gratia scheme. It is submitted that even a judicial notice can be taken that the severity of the impact and consequences of the di....
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....r such as Covid-19 the management of which has entailed into repeated nationwide lockdown unprecedented in history and its continuous cascading impact and consequences hitting across the life and liberties, business, industries and environment. Importation of prudential norms designed for resolution framework for stressed assets for lessor conditions of economic distress is only whimsical and irrational. It is submitted that it is, as such, dereliction of duty; xxxv) that the resolution framework as per 6.8.2020 has itself been held to be inadequate by none other than the NDMA as is evident from the views and recommendations of NDMA contained in the OM dated 28.08.2020. Having taken cognizance of RBI Circular dated 6.8.2020 the NDMA has observed that the borrowers require further relief from the banking system and exalted the RBI to grant further relief. Such inadequate measure of so-called resolution framework in the RBI circular dated 6.8.2020 ought not be accepted by this Court; xxxvi) that the resolution framework in RBI circular is highly bank centric and leans not only heavily but only in favour of the banks and lending institutions rather than walking e....
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....xxxviii) that the very nature of the issues involved in this case and of which cognizance is required to be taken are such that there is an eminent need in public interest of continuous monitoring of the statutory and executive action by this Court and further issuance of continuous directions and mandamus to all the authorities concerned. It is submitted that neither the magnitude and severity of the disaster which has continuous and cascading effect and considering the very concept of "disaster management" under the Act as an integrated and continuous process, the relief and measures adopted or required to be adopted cannot be a sort of one-time grant or package. It is submitted that with the evolution of situation there is a strong public interest and need for this Court to keep exercising its constitutional jurisdiction Under Article 32 of the Constitution so that the authorities do not fail, they remain active and vigilant and enormous class of victims of the disaster do not remain crying for the redressal of the grievances. In support of his submission, heavy reliance is placed on the decision of this Court in the case of T.N. Godavarman Thirumulkpad v. Union of India (1997) ....
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....focus on their own statutory and internal compliances and interests. It is submitted that the purpose of providing a relief framework for the borrowers affected by the Covid-19 pandemic stands defeated since lenders are incentivised to recover their costs. It is submitted that in such a scenario, the RBI ought to have made it mandatory for all lenders to provide relief under the impugned RBI notifications, Circulars dated 6.8.2020 and 7.9.2020 available at the option of the borrowers and not at the discretion of the lenders in order to provide relief to borrowers impacted by the outbreak of Covid-19. 5. Shri Kapil Sibbal, learned Senior Advocate appearing on behalf of CREDAI - Real Estate Sector has vehemently submitted that Real Estate Sector is also badly and severely affected due to nationwide lock down. It is submitted that the measures undertaken by the UOI/RBI are arbitrary, discriminatory, illusory and inadequate and does not offer any reliefs to the Real Estate Sector, when Real Estate Sector because of its importance and contribution towards country's economy requires special consideration. 5.1. It is further submitted that the Union of India/NDMA have failed to ....
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.... continuous decline in sales, investments, leasing and pricing in 2021 owing to the effect of Covid-19 pandemic. Shri Sibbal, learned Senior Advocate has further submitted that if the moratorium period is not extended till 31st March, 2021 and if the reliefs as sought for in the writ petition are not granted, then majority of all accounts will be qualified as NPA as per RBI Prudential norms on Income Recognition; asset classification and provisioning pertaining to advances; virtually no accounts would qualify for restructuring under the Restructuring Policy, since it is made applicable only to those accounts which are not in default for more than 30 days as on 01.03.2020 and credit rating of members of the CREDAI will be downgraded and permanently impaired, resulting in the witnesses of the members of the association becoming commercially unviable. It is submitted that real estate sector is one of the most affected sectors on account of the lockdown and the ongoing pandemic. The precarious situation has adversely affected not only over 1400 members of CREDAI - MCHI but also the 270 ancillary industries dependent on the real estate industry. If the sector suffers such irreparable lo....
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.... caused stress to large and small business and to individual borrowers who have lost their jobs and livelihoods. That they need relief which will help them to get back on their feet. It is submitted that however different segments/sectors have suffered differently. It is submitted that to mitigate the burden of debt servicing brought about the disruptions in the market conditions on account of Covid-19 pandemic, RBI came out with a circular dated 27.03.2020 which permitted lending institutions to grant a moratorium on payment of all instalments of term loams falling due between 1.3.2020 and 31.5.2020, which came to be extended till 31.08.2020. It is submitted that one of the grievances pertains to grant of waiver from paying interest which has accrued during the moratorium period while making the repayment of loan after the moratorium is over. It is submitted that one other grievance is waiver from paying interest on interest/compound interest accrued during the moratorium period. It is submitted that the Central Government is fully conscious of the difficulties faced by the various sectors and the stakeholders of various sectors within the purview of the Ministry of Finance and ot....
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....ry of Finance was fully alive to the problems of the borrowers which obviously cannot be a homogenous class, but by its very nature, has various categories of borrowing, namely, corporate loans, MSME loans and personal loans etc. It is submitted that these three broad categories may have several sub-categories within it, having their own peculiar problems/difficulties and, therefore, needing peculiar remedies and solutions. It is submitted that because of the very nature of the problems faced by various kinds and categories of stakeholders and the wide-ranging difference in the problems faced by several Sub-sections of those categories, it was consciously considered that it would not have been possible for the Ministry to provide for a "one size fits all" approach and it would be advisable that steps be taken for grant of relief/solutions for the problems arising during the pandemic through the regulator of the banking sector, viz., the RBI. 7.4. It is submitted that it was for this reason that the Ministry of Finance took the initiative and started interaction with RBI in this behalf, requesting the RBI to provide for various measures of relief to the borrowers. The Finance Min....
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....d-19 pandemic, the circulars issued by RBI permitted lending institutions to .... (a) to grant a moratorium on payment of all instalments, including interest, of terms loans falling due between 1.3.2020 and 31.8.2020; and (b) defer recovery of interest on working capital loans for the period from 1.3.2020 to 31.8.2020. It is submitted that under the aforesaid circulars a moratorium on payment of both, principal and interest was by its very nature a temporary standstill arrangement which gives relief to the borrowers in the two ways, namely, (i) the account does not become NPA despite non-payment of dues; and (ii) Credit Information Companies shall ensure that the moratorium does not adversely impact the credit history of the borrowers. It is submitted that while the standstill applicable to bank loans results in the bank not getting its funds back during the period of moratorium, the bank continues to incur cost on bank's deposits and borrowings. It is submitted that since a moratorium offers certain advantages to borrowers, there are costs associated with obtaining the benefit of a moratorium. 7.6. It is submitted that immediately upon the serious effects of Covid-19 bei....
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....ncial stability of the banking sector, and are always subject to changes keeping in mind the evolving dynamic situation at various stages. 7.9. It is submitted that with the framework under the RBI Circulars dated 6.8.2020, banks are fully empowered to resolve Covid-19 related stress and customise relief to individual borrowers through grant of various concessions in terms of: (i) alteration in the rate of interest and haircut on amount payable as interest; (ii) extension of the residual tenor of the loan, with or without moratorium, by up to two years; (iii) waiving penal interest and charges; (iv) rescheduling repayment; (v) converting accumulated interest into a fresh loan with a deferred payment schedule; and (vi) sanction of additional loan. 7.10. It is submitted that so far as the question of waiver of compound interest/interest on interest is concerned, the said issues are required to be examined in the context of the larger financial constraints faced by the country in particular and the world in general. It is submitted that as a part of....
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....; and (2) Aatma Nirbhar Package. It is submitted that the Garib Kalyan Package was for Rs. 1.70 lakh crore involving free food grains, pulses and gas cylinders and cash payment to women, poor senior citizens and farmers. More than 42 crore poor people received financial assistance of Rs. 65,454 crores under the package. It is submitted that the Aatma Nirbhar Package was for Rs. 20 lakh crores, involving support to MSMEs, Non-Banking Finance Companies, agriculture, sectors allied to agriculture, contractors, street vendors, State Governments, relief in provident fund contribution, extension of subsidy on home loans etc. 7.13. It is submitted that so far as the question of interest on interest is concerned, what is "moratorium" is required to be considered. It is submitted that the word "moratorium" is categorically defined by the RBI, while issuing various circulars. The relevant circulars of RBI show that "moratorium" was never intended to be "waiver of interest", but "deferment of interest". In other words, if a borrower takes benefit of the moratorium, his liability to make payment of contractual interest (both normal interest and interest on interest) gets deferred for a p....
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....ontractual interest on all outstanding advances will have to be charged even during the period of deferment and if this compounding interest is not received from the borrowers for any particular period, a commensurate denial of interest to customers holding deposits is inevitable and unimaginable and would obviously be unacceptable considering the categories of depositors. 7.16. It is submitted that waiving compound interest/waiving interest would result in very substantial and significant financial burden. There are several categories of banks, like Private Sector Banks, Small Finance Banks, Regional Rural Banks, Cooperative Banks, NBFCs etc. The classes and categories of borrowers also varies throughout the nation, and these can be broadly classified as big borrowers and small borrowers. It is submitted that it is impossible for banks to bear the burden resulting from waiver of compound interest/interest without passing on the financial impact to the depositors or affecting their net worth adversely, which would not be in the larger national economic interest. It is submitted that the Government bearing this burden would have an impact on several other pressing commitments ....
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....It is further submitted that to give further relief, Government has already suspended the operation from 25.03.2020 of Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 to protect corporate borrowers impacted by the Covid-19 crises. It is submitted that even the Kamath Committee set up by the RBI has recommended financial parameters for debt restructuring of 26 sectors affected by Covid-19. It is submitted therefore that whatever best could be done by the Government of India, the same has been done. 7.20. Now so far as the issues raised by a number of Petitioners and interveners seeking Sector-specific Reliefs, it is submitted that the various measures taken by the Government and the RBI, referred to hereinabove, include not only reliefs applicable across the board but also reliefs for the specific sectors. The Petitioners/interveners cannot pray for sector-specific relief by either waiver or restructuring by way of present proceedings Under Article 32 of the Constitution of India as the question of such financial stress management measures require examination and consideration of several financial parameters and its impact and are not suited for being judicially ....
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....umstances. It is submitted that all the decisions taken by the Central Government, the RBI as a regulator and the lending institutions are taken keeping in mind the severe financial stress globally as well as nationally and while ensuring that the sources are utilized so that the national economy and the economy of the banking sector can withstand the present financial situation, the duration of which is unknown. 7.23. Now so far as the submission that the National Plan, as required to be prepared Under Section 11 of the DMA 2005 has not been prepared and that the NDMA has failed to perform its duty cast Under Sections 12 & 13 of the DMA 2005 is concerned, Shri Mehta, learned Solicitor General has submitted as under: (i) that the DMA 2005 contemplates a "National Plan" Under Section 2(l) of the Act. Such plan is to be prepared Under Section 11 of the DMA 2005. That the NDMA has, in fact, prepared an exhaustive and comprehensive "National Disaster Management Plan" which takes care of several disaster known to humanity, like cyclone and wind, floods, urban flood, earthquake, tsunami, landslides, snow avalanche, draught, cold waves, thunderstorm, lightening et....
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....on 6 of the Act. It is submitted that the NDMA is an administrative body having limited function stipulated in Section 6 of the Act. It is not envisaged to be a "Super Government" which becomes repository of all functions and powers of the Ministries and Departments of the Government. It is submitted that it is not that once a disaster as defined Under Section 2(d) of the Act takes place, the functions of all Central Government Ministries stand vested in the NDMA and each and every measure shall be taken either only by the NDMA and not by the respective Ministries/Departments or at least vetted or ratified by NDMA. 7.23.3. After referring to Sections 2(a), (b), (c), (d), (e), (i), (m), (n), (o) and (p) and Section 6 of the Act, it is submitted by Shri Mehta that the disaster management under the Act by NDMA is restricted to Section 6 of the Act, while the nodal ministries under the National Plan take the steps. It is submitted that the NDMA itself would not start taking mitigating or relief measures unless and so long as the Central Government (acting through various Ministries/Departments) fails to do so. Referring to Sections 35 and 36 of DMA 2005, it is submitted that it is f....
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.... a limb of NDMA as the same is constituted under the Act by the Chairman of the National Executive Committee. 7.23.7. It is submitted that the Petitioners are under some misconception that the functions of all ministries are to be discharged by the NDMA and the NDMA should take a decision for the area in each ministry. It is submitted that so far as the economic impact of the present disaster is concerned, it is essentially the function of the Ministry of Finance and RBI to take measures Under Section 36 of the Act and the question of NDMA stepping into will not arise. 7.24. Now so far as the reliance placed by the Petitioners upon Section 13 of the Act is concerned, it is submitted that in Section 13 the word used is "may". It is submitted that the word "may" used in Section 13 shall have to be read as an enabling discretionary provision and not mandatory. The legislature has in its wisdom and foresight refrained from using the word "shall". It is submitted that the interpretation of the word "may" as "shall" will lead to consequences which are never intended by the legislature. It will also lead to disastrous consequences. 7.24.1. It is submitted that the provision of Se....
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....one anything is otherwise also factually incorrect. It is submitted that it is uncharitable and unfair to the unprecedented effort made by the NDMA and various ministries including the Ministry of Finance. It is submitted that in view of the hearing which took place before this Court earlier, the NDMA also took cognizance of the issues being dealt with by the RBI and sent its "views and recommendations" vide OM dated 28.08.2020 and opined that in view of the same the RBI may consider granting further reliefs as deemed appropriate after considering and taking into account the financial relief packages issued by the Ministry of Finance, as well as, other relief measures that have already been issued and declared by RBI itself. It is submitted that "views and recommendations" of NDMA were communicated to RBI vide letter dated 31.08.2020. 7.24.5. It is submitted that the "views and recommendations" of the NDMA deal with broad financial policy decisions having economic implications and other implications in the banking sector. Therefore, the Ministry of Finance, vide letter dated 31.08.2020, forwarded the "views and recommendations" of the NDMA to RBI requesting it to consider the "v....
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....s observed by this Court the function of the Court is to see that lawful authority is not abused but not to appropriate to itself the task entrusted to that authority. It is further observed that the Courts are not to interfere with economic policy which is the function of experts. It is not the function of the courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. It is submitted that it is further observed that the functions of the Court are not to advise in matters relating to financial and economic policies for which bodies like RBI are fully competent. It is further observed that the Court can only strike down some or entire directions issued by the RBI in case the Court is satisfied that the directions were wholly unreasonable or violative of any provisions of the Constitution or any statute. He has relied upon paragraphs 31, 37 and 38 of the aforesaid decision. 7.25.2. It is further submitted that in the case of Federation of Railway Officers Association v. Union of India (2003) 4 SCC 289, it is observed that on matters affecting policy and requiring technical expertise the court would leave the matter for decision ....
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....r to any banking company in particular, in public interest or in the interest of the Banking Policy or to prevent the affairs of the banking company being conducted in a manner detrimental to the interest of its depositors or in a manner prejudicial to the banking company. Furthermore, Under Section 21 of the BR Act, the RBI is conferred with specific powers to determine the policy in relation to advances to be followed by the banking companies; ii) that the Legislature has conferred various powers on RBI empowering it to determine the banking policies to be followed by the banking companies. That the RBI being the regulator of the banking sector, took cognizance of the probable stress caused in the financial situation and conditions of the citizens of this country-the consequent stress upon the economy due to outbreak of Covid-19 pandemic and issued a statement on Development and Regulatory Policies dated 27.03.2020 with the following objective and purpose: i) Expanding liquidity in the system sizeably to ensure that financial markets and institutions are able to function normally on the face of COVID-19 related d....
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....3.2021. Further, in respect of term loans, it has been provided that the repayment Schedule for such loans, including interest as well as principal, as also the residual tenor, will be shifted across the board; v) that the lending institutions are required to frame Board approved policies for providing the reliefs pursuant to circulars issued by the RBI from time to time to all eligible borrowers and disclosed in public domain. Since the customer profile, organizational structure and spread of each lending institution is widely different from others, each lending institution is best placed to assess the requirements of its customers. Therefore, the discretion was left to the lending institutions concerned; vi) that the banks are commercial entities that intermediate between the depositors and the borrowers and are expected to run on viable commercial considerations. That the banks being custodians of depositors' money, their actions need to be guided primarily by the protection of depositors' interests. Any borrowing arrangement is a commercial contract between the lender and the borrower and the interest rates reflect the same. T....
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....ng level of their investments in these bonds. The first such TLTRO auction was conducted on March 27, 2020. April 17, 2020 * CRR reduced[3] by 100 bps to 3.0 per cent of NDTL effective March 28, 2020 for a period of one year ending on March 26, 2021. April 27, 2020 * It was decided to conduct Targeted Long-Terms Repo Operations (TLTROs) 2.0 at the policy repo rate. Liquidity availed under the scheme by banks is to be deployed in investment grade corporate bonds, commercial paper, and non-convertible debentures with at least 50 per cent of the total amount availed going to small and mid-sized NBFCs and MFIs. The first such TLTRO 2.0 auction was conducted on April 23, 2020. April 30, 2020 * In order to ease the liquidity pressure on mutual funds, it was decided to open a special liquidity facility for mutual funds (SLF-MF). Liquidity availed under the scheme by banks is to be deployed exclusively for meeting needs of Mutual Funds. The first such SLF-MF auction was conducted on April 27, 2020. October 9, 2020 * It was decided to extend regulatory benefits announced under the SLF-MF scheme to all banks, irrespective of whether they ....
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....nder the Prudential Framework for Resolution of Stressed Assets dated June 7, 2019 to enable the lenders to implement a resolution plan in respect of eligible corporate exposure without change in ownership, and personal loans, while classifying such exposures as Standard, subject to specified conditions. Only those accounts which were classified as Standard and were not in default for more than 30 days as on March 1, 2020 are eligible for resolution under this window. The window may be invoked by December 31, 2020 and the resolution plan has to be implemented within 90 days from date in invocation for personal loans, and 180 days from the date of invocation in the case of other loans. * The existing loans to MSMEs classified as standard as on March 1, 2020 and where the aggregate exposure of banks and NBFCs did not exceed Rs. 25 crores as on March 1, 2020 were permitted to be restructured without a downgrade in asset classification subject to conditions specified in RBI Circular dated August 06, 2020 on 'Micro, Small and Medium Enterprises (MSME) sector-Restructuring of Advances'. The restructuring plan has to be implemented by March 31, 2021. September 7, 2....
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....tal amount of Rs. 50,000/- crore were provided to NABARD, SIDBI and NHB to enable them to meet sectoral credit needs[4]. May 23, 2020 * A line of credit of Rs. 15,000/- crore was extended to EXIM bank for a period of 90 days from the date of availment with rollover up to a maximum period of one year to enable it to avail a US dollar swap facility to meet its foreign exchange requirements. June 21, 2020 * With a view to facilitate greater flow of resources to corporate that faced difficulties in raising funds from the capital market and predominantly dependent on bank funding, caused by sudden market uncertainties, a bank's exposure under the Large Exposure Framework, to a group of connected counterparties was increased from 25 per cent to 30 per cent of the eligible base of the bank. The increased limit will be applicable up to June 30, 2021. July 1, 2020 * A credit facilities to MSME borrowers, extended under the emergency credit line guarantee scheme of GoI guaranteed by national credit guarantee trustee company (NCGTC), are backed by an unconditional and irrevocable guarantee provided by the GoI, member lending institutio....
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....verting all short-term crop loans into KCC loans. June 4, 2020 * Circular on ISS and PRI for short-term crop loans during the years 2018-19 and 2019-20 extending moratorium period till August 31, 2020. VI. External Trade April 1, 2020 * The period of realization and repatriation to India of the amount representing the full export value of goods or software or services exported was increased from nine months to fifteen months from the date of export, for the exports made up to or on July 31, 2020. May 22, 2020 * The time period for completion of remittances against normal imports, i.e., excluding import of gold/diamonds and precious stones/jewellery (except in cases where amounts are withheld towards guarantee of performance) was extended from six months to twelve months from the date of shipment for such imports made on or before July 31, 2020. May 13, 2020 * Interest equalization scheme for pre and post shipment rupee export credit was extended by GoI for one more year, i.e., up to March 31, 2021, effective from April 1, 2020 and all extant operational instructions issued by the Reserve Bank....
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.... a more durable solution was needed to rebalance the debt burden of viable borrowers, both businesses as well as individuals, relative to their cash flow generation abilities. It is submitted that with this consideration in mind the Reserve Bank has announced the Resolution Framework for Covid 19-related Stress ("Resolution Framework") on August 6, 2020, which enabled the lenders to implement a resolution plan in respect of personal loans as well as other exposures affected due to Covid 19, subject to the prescribed conditions, without asset classification downgrade. The framework, inter alia, permits extension of the moratorium by a maximum of two years. 8.3. It is submitted that the Resolution Framework issued by the Reserve Bank on August 6, 2020 is aimed at facilitating revival of real sector activities and mitigating the impact on the ultimate borrowers, which are under financial stress caused by economic fallout on account of Covid-19 pandemic. It is submitted that in terms of the Resolution Framework, only those borrower accounts shall be eligible for resolution which were classified as standard, but not in default for more than 30 days with any lending institution as on ....
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....mitted that the Committee found that it is neither possible nor desirable to arrive at any one particular formula, whether sector-specific or otherwise, to deal with the stress situation arising from the unprecedented pandemic. It is submitted that the resolution of such stressed accounts shall have to be made only by and between the borrowers and the lending institutions. It is submitted that the Kamath Committee while identifying 26 sectors, laid down parameters that are to be guidance for the lending institutions while undertaking the process of restructuring/resolution. 8.5.1. It is submitted that Kamath Committee based resolution plans are applicable only to big borrowers having big and specific problems requiring resolution/restructuring, and such resolution can be done only after evaluating projections of cash flows and viability, which requires banking expertise and knowledge of the finance sector and which can be done only by the lending institutions on a case-by-case basis. 8.5.2. It is submitted that so far as the borrowers which are not big borrowers, their accounts are eligible to be restructured by the respective lending institutions as per RBI circular dated 6.....
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....amework issued by the RBI on 6.8.2020 are the policy decisions, the judicial interference by this Court is not warranted. It is submitted that every regulatory forbearance has its trade-offs in terms of adverse incentives and unintended consequences. It is submitted that the RBI has exercised its expert wisdom in issuing binding guidelines to lending institutions on how to differentiate the risks arising from borrowers with pre-existing financial difficulties from those which were performing well but had been impacted by the pandemic. RBI has taken a balanced view, taking into account the interest of the depositors, borrowers, real sector entities and banks. Financial stability and economic growth of the country were also kept in mind while arriving at its policy decisions by the RBI. 9.3. It is submitted that this Court in a number of decisions have held that the courts are not to interfere with the economic policy which is the function of experts. It is not the function of the courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. It is submitted that even in such matters even experts can seriously and doubtlessly differ....
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....he lenders, there may be various options/reliefs which may be available, however ultimately, it is for the policy maker to take appropriate decisions/frame appropriate policies after having the expert opinion. It is submitted that once a conscious decision of various reliefs has been taken, unless it is arbitrary and merely because some sectors are not agreeable, it cannot be set aside. It is submitted that while announcing various packages/reliefs, each and every aspect has been considered from all angle. 10.1. It is submitted that the resolution regarding restructuring of debts is to be considered by the lenders and not by the borrowers. He has also relied upon catena of decisions of this Court on judicial review of the policy decisions, relied upon by Shri Tushar Mehta, learned Solicitor General, referred to hereinabove. 10.2. It is submitted that, as such, various reliefs/measures have been announced by the RBI. The RBI announced a moratorium on the repayment of term loans, initially for a period of three months and further extended by another three months, which came to an end on 31.08.2020. The avowed object of allowing such a moratorium was to ease the financial stress....
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....nce each sector and Section 13 of the Act uses the words "persons affected". It is submitted that different persons/sectors have impact differently and therefore keeping in mind the different impact on different persons/sectors, the Central Government through its various ministries, RBI and the banks have provided different packages/reliefs. 10.6. It is submitted that, as such, as pointed out by Shri Mehta, learned Solicitor General, a conscious decision has been taken by the NDMA. It is submitted that under the DMA, prevention and mitigation shall be within the statutory framework. It is submitted that the architecture of the DMA 2005 is clearly a structure of enabling powers to be exercised concurrently with the executive powers of the Government and other statutory powers available to the Governments at the Union, State and District levels. It is submitted that therefore there is no question of there being a power coupled with a duty-overall duties of each of the statutory functionaries are set out in the various provisions and enabling provisions are made to give relief as may become necessary. It is submitted that there may be a pandemic or a natural disaster which ma....
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....f Directors of the State Bank of India has been framed after considering the recommendations of the Kamath Committee. He has also reiterated on judicial review of the economic policy decisions; adverse effect on the banking system if the prayer of waiver of interest/penal interest is accepted and on interpretation of various provisions of DMA 2005. 12. Having heard learned Counsel appearing on behalf of the respective Petitioners and the reliefs sought in the respective petitions, the reliefs/submissions on behalf of the Petitioners can be summarized as under: i) a complete waiver of interest or interest on interest during the moratorium period; ii) there shall be sector-wise relief packages to be offered by the Union of India and/or the RBI and/or the Lenders; iii) moratorium to be permitted for all accounts instead of being at the discretion of the Lenders; iv) extension of moratorium beyond 31.08.2020; v) whatever the relief packages are offered by the Central Government and/or the RBI and/or the Lenders are not sufficient looking to the impact due to Covid-19 Pandemi....
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....stify, if they do not require, rough accommodation, illogical, if may be, and unscientific. But even such criticism should not be hastily expressed. What is the best is not always discernible; the wisdom of any choice may be disputed or condemned. Mere errors of Government are not subject to our judicial review. It is only its palpably arbitrary exercises which can be declared void... 14.3. This Court in the case of Nandlal Jaiswal (supra) has observed that the Government, as laid down in Permian Basin Area Rate Cases, 20 L Ed (2d) 312, is entitled to make pragmatic adjustments which may be called for by particular circumstances. The court cannot strike down a policy decision taken by the State Government merely because it feels that another policy decision would have been fairer or wiser or more scientific or logical. The court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide. 14.4. In the case of BALCO Employees' Union (Regd.) (supra), this Court has observed that Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutor....
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.... infrastructural project or not and what is the type of project to be undertaken and how it has to be executed, are part of policy-making process and the courts are ill-equipped to adjudicate on a policy decision so undertaken. The court, no doubt, has a duty to see that in the undertaking of a decision, no law is violated and people's fundamental rights are not transgressed upon except to the extent permissible under the Constitution. 233. At the same time, in exercise of its enormous power the court should not be called upon to or undertake governmental duties or functions. The courts cannot run the Government nor can the administration indulge in abuse or non-use of power and get away with it. The essence of judicial review is a constitutional fundamental. The role of the higher judiciary under the Constitution casts on it a great obligation as the sentinel to defend the values of the Constitution and the rights of Indians. The courts must, therefore, act within their judicial permissible limitations to uphold the Rule of law and harness their power in public interest. It is precisely for this reason that it has been consistently held by this Court that....
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....se of action instead of another is not a matter of concern in judicial review and the court is not the appropriate forum for such investigation. The policy decision must be left to the government as it alone can adopt which policy should be adopted after considering of the points from different angles. In assessing the propriety of the decision of the Government the court cannot interfere even if a second view is possible from that of the government. 18. Legality of the policy, and not the wisdom or soundness of the policy, is the subject of judicial review. The scope of judicial review of the governmental policy is now well defined. The courts do not and cannot act as an appellate authority examining the correctness, stability and appropriateness of a policy, nor are the courts advisers to the executives on matters of policy which the executives are entitled to formulate. 19. Government has to decide its own priorities and relief to the different sectors. It cannot be disputed that pandemic affected the entire country and barring few of the sectors. However, at the same time, the Government is required to take various measures in different fields/sectors like public health, ....
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....tion is absolute and it is to be within permissible reasonable restriction. This principal equally applies when there is any constraint on the health budget on account of financial stringencies. It is the cardinal principle that it is not within the legitimate domain of the court to determine whether a particular policy decision can be served better by adopting any policy different from what has been laid down and to strike down as unreasonable merely on the ground that the policy enunciated does not meet with the approval of the court in regard to its efficaciousness for implementation of the object and purpose of such policy decision. 22. With the limited scope of judicial review on the policy decisions affecting the economy and/or it might have financial implications on the economy of the country, the reliefs and submissions stated hereinabove are required to be considered. Whether there shall be a waiver of interest during the moratorium period or whether there shall be sector-wise relief packages and/or RBI should have issued directions which are sector specific and addressing such sector specific issues and/or whether the moratorium period should be extended beyond 31.0....
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....ts circular dated 7.9.2020 which provides for separate threshold for 26 sectors including power, real estate and construction. Even otherwise, it is required to be noted that every sector might have suffered differently and therefore it will not be possible to provide sector specific/sector-wise reliefs. The Petitioners cannot pray for sector specific relief by either waiver of interest or restructuring by way of present proceedings Under Article 32 of the Constitution of India and the question of such financial stress management measures requires examination and consideration of several financial parameters and its impact. 25. Now so far as the submission on behalf of the Petitioners that as per the notifications/circulars/reliefs offered by the RBI and/or Finance Department of the Union of India ultimately it is left to the bankers and it should not have been left to the bankers and the Government/RBI must intervene and provide further reliefs is concerned, at the outset, it is required to be noted that as such the bankers are commercial entities and since the customer profile, organizational structure and spread of each lending institution is widely different from others, eac....
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....s, Non-Banking Finance Companies, agriculture, sectors allied to agriculture, contractors, street vendors, State Governments, relief in provident fund contribution, extension of subsidy on home loans etc. Therefore, it cannot be said that the Central Government and/or the RBI have not done anything and/or have not offered any reliefs whatsoever. While offering the financial relief packages, the financial constraint and/or financial burden on the government is also required to be considered and borne in mind, which can be considered by the experts and the government and the courts have not expertise to assess the financial burden. From the various steps/measures/policy decisions/packages declared by the Union of India/RBI and the bankers, it cannot be said that the UOI and/or the RBI have not at all addressed the issues related to the impact of Covid-19 on the borrowers. As such, none of the Petitioners have specifically challenged the various circulars/policy decisions taken by the UOI/RBI. From the submissions made by the learned Counsel appearing for the respective parties, it appears that the borrowers want something more than the reliefs announced. Merely, since the reliefs ....
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....c and that NDMA has not performed its duty under the DMA 2005 is concerned, to appreciate the above, the relevant provisions of DMA 2005 are required to be referred to and considered. Section 3 of the Act provides for establishment of National Disaster Management Authority which shall consist of the Prime Minister of India, who shall be the Chairperson of the National Disaster Management Authority and other members not exceeding nine, to be nominated by the Chairperson of the National Authority. Powers and functions of the National Authority are provided Under Section 6, which reads as under: 6. Powers and functions of National Authority.--(1) Subject to the provisions of this Act, the National Authority shall have the responsibility for laying down the policies, plans and guidelines for disaster management for ensuring timely and effective response to disaster. (2) Without prejudice to generality of the provisions contained in Sub-section (1), the National Authority may-- (a) lay down policies on disaster management; (b) approve the National Pl....
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....the Chairperson, ex officio, and the Secretaries to the Government of India in the Ministries or Departments having administrative control of the agriculture, atomic etc., as mentioned in Section 8(2)(b) of the Act. As per Section 9 of the Act, the National Executive Committee, as and when it considers necessary, constitute one or more sub-committees for the efficient discharge of its functions. The powers and functions of the National Executive Committee are as per Section 10 of the Act, and more particularly (a) to act as the coordinating and monitoring body for disaster management.... (b) coordinate and monitor the implementation of the National policy; (c) monitor the implementation of the National Plan and the plans prepared by the Ministries or Departments of the Government of India; (d) monitor the implementation of the guidelines laid down by the National Authority for integrating of measures for prevention of disasters and mitigation by the Ministries or Departments in their development plans and projects; (e) monitor, coordinate and give directions regarding the mitigation and preparedness measures to be taken by different Ministries or Departments and agencies of the Gov....
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....tters, namely: (a) coordination of actions of the Ministries or Departments of the Government of India, State Governments, National Authority, State Authorities, governmental and non-governmental organizations in relation to disaster management; (b) ensure the integration of measures for prevention of disasters and mitigation by Ministries or Departments of the Government of India into their development plans and projects; (c) ensure appropriate allocation of funds for prevention of disaster, mitigation, capacity-building and preparedness by the Ministries or Departments of the Government of India; (d) ensure that the Ministries or Departments of the Government of India take necessary measures for preparedness to promptly and effectively respond to any threatening disaster situation or disaster; (e) cooperation and assistance to State Governments, as requested by them or otherwise deemed appropriate by it; (f) ....
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....nments for-- (i) drawing up mitigation, preparedness and response plans, capacity-building, data collection and identification and training of personnel in relation to disaster management; (ii) carrying out rescue and relief operations in the affected area; (iii) assessing the damage from any disaster; (iv) carrying out rehabilitation and reconstruction; (g) make available its resources to the National Executive Committee or a State Executive Committee for the purposes of responding promptly and effectively to any threatening disaster situation or disaster, including measures for-- (i) providing emergency communication in a vulnerable or affected area; (ii) transporting personnel and relief goods to and from the affected are....
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....ry of Agriculture and Farmers Welfare would be the nodal agency; if the disaster is due to floods, Ministry of Housing and Urban Affairs would be the nodal agency and if the disaster is due to "biological emergencies", the Ministry of Health and Welfare would be the nodal agency. The disaster due to Covid-19 pandemic would fall under disaster due to "biological emergencies". However, it appears that Covid-19 pandemic disaster is of such a nature that it could not be confined to one nodal ministry and whatever measures/reliefs are required to be taken/given are provided by every Ministry in each and every day needed. Therefore, various reliefs/packages are provided by different Ministries, such as, Ministry of Railways, Ministry of Finance, Ministry of Health and Family Welfare etc. It also appears that even considering the very nature of the pandemic which would have PAN-India impact, empowered groups were constituted by the National Disaster Management Authority. Therefore, when there is already in existence a National Plan, which might have been prepared even prior to the Covid-19 pandemic, it cannot be said that there is no National Plan by the NDMA at all. National Plan would b....
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....nment has also granted Rs. 50,000 crores Fund of Funds for providing growth equity to MSMEs. The Central Government has also come out with a new definition of MSMEs for improving turnover caps for better access of schemes/benefits. There are other reliefs also announced by the Central Government. The Central Government has also declared the moratorium from March to August, 2020. The proceedings under the IBC are also suspended during the moratorium period. 30.2. As per the provisions of the DMA 2005, the responsibilities and functions of the discharge of functions by the NDMA would be confined to Section 6 of the Act. However, on-ground disaster management and relief measures shall have to be undertaken by the Central Ministries and the State Government Ministries depending upon the need of the disaster and only in a case where the NDMA is satisfied that the reliefs which are already announced are not sufficient and/or no steps are taken at all with respect to the reliefs mentioned in Section 13, the National Authority may recommend the reliefs in repayment of loans etc. Therefore, it cannot be said that the National Authority has failed to perform its duty as cast Under Section....
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....tion loans up to Rs. 2 crore There is no justification shown to restrict the relief of not charging interest on interest with respect to the loans up to Rs. 2 crores only and that too restricted to the aforesaid categories. What are the basis to restrict it to Rs. 2 crores are not forthcoming. Therefore, as such, there is no rational to restrict such relief with respect to loans up to Rs. 2 crores only. Even otherwise, it is required to be noted that the scheme dated 23.10.2020 granting relief/benefit of waiver of compound interest/interest on interest contains eligibility criteria and it provides that any borrower whose aggregate of all facilities with lending institution is more than Rs. 2 crores (sanctioned limit or outstanding amount) will not be eligible for ex-gratia payment under the said scheme. Therefore, if the total exposure of the loan at the grant of the sanction is more than Rs. 2 crores, the borrower will be ineligible irrespective of the actual outstanding. For Example, if the borrower has been sanctioned a loan of Rs. 5 crores and has availed of the same, even though he might have repaid substantially bringing down the principal amount of less than Rs. 2 crores ....